Trying To Understand Why Obama Is Protecting The Filthy Banksters At The G-20

I figured I would tune in Rachel Maddow last night and she'd be asking someone to talk her off the cliff in terms of why Obama seems to be on the wrong side of the argument in London. She didn't; maybe tonight. The problem is that the Europeans taking part in the G-20 summit are insisting on the kinds of financial regulations Democrats (and Mitt Romney) seem to want-- or at least tell us they want. Well, at least progressive Democrats are in that camp, not the bought-and-paid for tools of the banksters like Max Baucus and Mary Landrieu. Meanwhile, French President Nicolas Sarkozy says "he would reject an agreement that puts off stringent new regulations on banks, tax havens, and hedge funds."

It scares me that Obama isn't on the same page with Sarkozy and German Chancellor Angela Merkel on these issues. The damn American press seems so obsessed with Michelle Obama's fashion statement, Barack Obama's present for the possibly senile Queen of England, and what celebrity chef Jamie Oliver served up at Buckingham Palace that coverage of the ideas being discussed at the summit is exceptionally shallow. There's a relatively decent, albeit brief, rundown of what each country wants on the BBC website. The BBC's chief economic correspondent, Hugh Pym, takes a stab at explaining the differences between the Obama/Brown positions and the Sarkozy/Merkel positions but his analysis is so superficial that he could be trying out for a position at CNN.

I'm trying to figure this out myself and it looks like Sarkozy, who has gone in a dangerously protectionist direction, one that if followed by other countries would be absolutely catastrophic for the tightly interwoven global economy, is barking about tough regulations to distract everyone from his own shortcomings as an internationally cooperative leader. Yesterday's Guardian:

Christine Lagarde, the French finance minister, issued her country's strongest warning yet to G20 leaders. Sarkozy was "very determined" and would "walk away" if he was not satisfied on regulation, she told the BBC. Sarkozy recently said: "If things don't advance in London there will be an empty chair. I'll get up and leave."

...[Obama noted], "The notion that somehow there are those pushing for regulation and those resisting regulation is belied by the facts."

Still, the things that Merkel and Sarkozy seem to be calling for are the kinds of things you're hearing from progressive Democrats like Alan Grayson in Congress-- things being fought by American banksters and their bought-and-paid for political hacks from John Boehner (R-OH), Paul Ryan (R-WI), Judd Gregg (R-NH) and Mitch McConnell (R-KY) to Ben Nelson (D-NE) and Mark Pryor (D-AR). The French and German leaders "demanded new rules governing hedge funds, steps to control executive pay and new financial 'architecture' to ensure no repeat of the global crisis." The Wall Street Journal went a little deeper:

French and German officials have made a point of stressing the role of lightly regulated U.S. financial institutions in spurring a problem that then enveloped Europe, a point Mr. Sarkozy repeated yesterday.

"Compromise has to be engaged in by all parts of the world, all regions of the world," he said, adding pointedly: "The crisis didn't actually spontaneously erupt in Europe, did it?"

Hoping to disarm G-20 members looking for someone to blame, Mr. Obama accepted some American responsibility. "If you look at the source of this crisis, the United States certainly has some accounting to do with respect to a regulatory system that was inadequate," he said during the joint news conference with Mr. Brown.

Yet he warned that the world can't rely on the U.S. to drive global growth. "It can't just be the United States as the engine, everybody is going to have to pick up the pace," he said... Mr. Sarkozy and Ms. Merkel warned the G-20 meeting won't do enough to solve the world's financial problems. "We sometimes like to sweep things under the carpet-- not actually tackling matters at the root cause," Ms. Merkel said.

Both leaders called for establishing a new regulatory structure that would mean tougher rules for banks and hedge funds. In their minds, Mr. Sarkozy said, the G-20 meeting in November in Washington established principles. The London summit, the French president said, needed to yield concrete plans. Stimulus attempts are a good way to restart the global economy, he said, but regulation has to be improved.

Credit-ratings agencies were one target. Mr. Sarkozy expressed disdain for the fact that securities rated triple-A can fall to triple-B in a short period of time. The leaders' comments were broad, but Mr. Sarkozy offered one specific goal: that banks retain some of the loans that they bundle into securities and sell to investors in a process known as securitization. "We want traceability," Mr. Sarkozy, adding: "A bank that engages in securitization should keep on its balance sheet a part of what it has securitized."

This morning's NY Times reports the G-20 leaders have come to agreement, presumably while the rest of us were sleeping. There's "tough language against protectionism, including a pledge to 'name and shame' countries that erect trade barriers"-- though I bet they exempt France-- and they're working on the details about "the level of scrutiny that regulators should have over hedge funds and global financial institutions." Disturbingly, Obama-- and China-- are still resisting effective re-regulation of banksters.

While the United States was determined to resist European efforts to create regulatory authorities with cross-border authority, officials said the two sides were trying to hash out policies on transparency and early risk warnings for banks that would placate France and Germany.

“There’s not going to be a ceding of sovereignty to a global regulator,” said a White House official, who spoke on condition of anonymity because the negotiations were confidential.

France and other Europeans countries also pressed China to accept action against tax havens, a step it has resisted because of the possible consequences for its coastal banking centers, Hong Kong and Macao.

“I think we’re going to see an agreement,” said Stephen Timms, the financial secretary to the Treasury Department. “I am expecting sanctions against tax havens. We want that pressure to be maintained.”

Britain began talks on Wednesday on a tax information exchange agreement with Liechtenstein, an Alpine principality used by wealthy Europeans and others as a place to stash money.